Good for the bottom line: The CSR panel [extended]

While CSR is embraced by most corporations, the prevailing motivation remains feel-good, not financial. A quartet of industry leaders joined Gideon Fidelzeid in New York City at this RF|Binder-hosted panel to provide clear examples and tangible proof that sustainable activity equals economic prosperity

Defining sustainability

Gideon Fidelzeid (PRWeek):What are your primary thoughts when you think about sustainability?

Nancy Elder (JetBlue): My immediate thoughts go to the Bill McKibben book, The End of Nature. It's about the environment and climate change. It’s a really potent, elegant way of describing the crisis at hand, but he took it a step further in talking about our resources.

Sustainability is not just about our environmental resources. It’s about our human resources. It’s about how we treat ourselves. It’s about how we treat our fellow man. It’s how we operate with each other and the planet.

Andrea Pinabell (Starwood Hotels): I grew up in Iowa. It is the center of where you have energy, food, and water. You really get a sense of the Earth and its importance.

I’m also an engineer by education, so I always look at things from a process-driven perspective. I look at how things work and how they connect.

Bringing that into the corporate world, that sense of nature, sense of data, and sense that it does drive profitability have really lent themselves to Starwood having a very triple bottom-line focus.

Susan Arnot Heaney (Rainforest Alliance): The Rainforest Alliance’s mission is to help save the planet and the people who live on it. However, we distilled that down to planet and people prospering together – with the emphasis on prospering. You cannot save the planet and sacrifice the people. You cannot save the people and sacrifice the planet.

We focus heavily on transforming business practices, land-use practices, and consumer behavior, but it all comes back to planet and people together.

Scott Beaudoin (RF|Binder): Simply put, sustainability is business practices that are fit for the future. We tend to use a lot of jargon internally at companies, but people don’t understand it. We have to start talking about it in terms of business benefits.

The cost of doing business

Fidelzeid (PRWeek):How can businesses best account for sustainability in terms of cost?

Pinabell (Starwood Hotels): We attach an ROI to basically everything associated with the environment. It starts with a corporate goal. In our case, we call it "30, 30, and 20." It is our commitment to reduce our energy consumption and greenhouse gas emissions by 30% and our water consumption by 20% - all by 2020.

We have 10 brands, are located in more than 100 countries, with about 1,400 locations worldwide. So collecting the data is crucial – and it’s not just about the consumption data, but also the cost data. If we can’t talk about the benefits and cost reductions to our hotel owners it won’t resonate with them. Of course they’ll appreciate it if we reduce our footprint, but the message is much more powerful if we can say that since we started measuring in 2008 we’ve saved almost $200 million in energy and water costs.

It’s not just about having goals. It’s embedding the goals, tying it to cost reductions, and understanding that sustainable activity not only reduces costs to our owners, but it also reduces the risks in some of the areas that are very volatile. For example, island locations, where we have seen upwards of a 19% increase in energy costs over the last few years.

Elder (JetBlue): We obviously measure everything from how our reputation is impacted to message effectiveness. However, we have to take is a step further because of the industry we’re in. A few years ago, we partnered with the Clinton Global Initiative and the Ocean Foundation to create a study that directly correlates the health of beaches and oceans as it relates to our business. Our major business metric is RASM – revenue per available seat mile.

Our primary customers are families going on vacation. Moreover, 30% of our business comes from Latin America and the Caribbean. So imagine you’re sitting on a beach. What if the water is polluted, there is a lot of garbage, or the coral is dying? Our business will die. We need to serve these markets because that’s where our customers want to go.

There is absolutely no ambiguity at JetBlue about this. We have to work every single day around measuring this and making sure that we are doing the right thing so our customers have great places to go.

Heaney (Rainforest Alliance): Our organization offers advisory and certification services for business of all sizes, so this is something very top of mind for us. And the advice we give business is fairly clear. No matter what sector you are in, you want to make your margins, make your numbers, make your deliveries, and, of course, mitigate risk.

I’ll offer one example. Say your sustainable activity – or lack thereof – facilitates activists to repel down the side of your main building, much like what happened to Mattel a few years ago when Greenpeace was protesting Barbie packaging. Mattel refused to meet with the activists, so they came through the windows. Business had to stop. It’s not hard to connect the dots to see where this impacts costs and revenue generation.

Beaudoin (RF|Binder): I’d be interested to know if any businesses are doing environmental P&L statements. It seems to be an emerging theory that can be implemented. It is also a clear way to equate sustainable business practices with financial metrics.

Elder (JetBlue): We certainly need to be doing more of that, though it’s not a hard sell to our CFO because our business doesn’t exist if we don’t help get this right for the planet and our customers.

I must note Puma, which in 2011 became the first company ever to establish an environmental P&L account. It set a precedent. It’s the future.

Pinabell (Starwood Hotels): A lot of the work we do in sustainability actually opens doors to new markets because we are able to prove we walk the walk. That said, we do not have an environmental P&L.

However, we have taken a deep look at our 10-K report to see what additional risk-mitigation factors we could put into it to drive that first level of awareness. In doing this, we studied our competitors to see what they were doing on this front. We subsequently decided to take the leadership step and actually put in climate change, water risk, and some of the social issues into our 10K because we felt it was that important and that integrated into our overall business strategy.

Effective reporting

Fidelzeid (PRWeek):What are the main factors you consider when it comes to reporting on sustainability efforts?

Pinabell (Starwood Hotels): We’re an asset-light organization. We only own about 2% of our hotels, so the other 98% are either managed or franchised. We’re always talking about other people’s assets, other people’s money. So reporting is very important.

We also do corporate responsibility reporting using the G4 framework, which is really important because it talks about supply chain and materiality and things associated with that. As proven by the investor calls I've done, these matters are very important to our shareholders. I must also note these questions used to come exclusively from UK and EU investors, but more and more questions are coming from stateside investors.

Another key part of our reporting is through CDP (the Carbon Disclosure Project), which is noteworthy because CDP information gets pulled through to the Bloomberg terminals. That makes transparency even more vital in reporting because more people are able to get more information and, in turn, can ask more questions about what companies are doing with their supply chain, their use of water, their efforts to mitigate climate risk, and so on.

Elder (JetBlue): Something we're watching very closely that is coming down the pike is market-based measures with regard to emissions. For us, it’s not just about what’s happening at the beach on your vacation. It’s about whether or not we are carbon offsetting relative to emissions. What are we doing on technology that reduces fuel consumption? Those are the primary drivers we will increasingly be measured against, in addition to the actual technology of biofuels. That has to be an emphasis for us now.

Heaney (Rainforest Alliance): In case anyone feels the senior level doesn't care about this, a story from my days at Avon. It was a Friday at 5pm and I was in charge of filing the ESG (environmental, social, and governance) report with Goldman Sachs. I couldn't find the email address to send it to, but the IR folks told me to wait until Monday because "they don't care about that." I insisted I had to file that day. I told them to call the person who covers Avon. They did, were immediately given all the necessary contact details, and then said to me, "I can't believe they know about this stuff."

As for transparency, we advise our partners about the pressure that comes with that. Everyone loves transparency, but the problem is if you’re transparent but don’t show progress, you haven't done anything. Behind the transparency you need to actually do something worth reporting.

Beaudoin (RF|Binder): The idea of integrated reporting is really exciting. Of course, 97% of companies on the World Stock Exchange actually don’t do simple reporting on issues such as water, waste, energy, and emissions, so that concept might be far from happening. It's clear from today's conversation that sustainability issues need to be part of broader financial reporting, but it's a major obstacle when so many companies don't even do the basics.

Tangible impact

Fidelzeid (PRWeek):Please talk specifically about how sustainability efforts have impacted business results.

Heaney (Rainforest Alliance): I'll focus on my last corporate role at Avon in 2013. Interbrand rates the top 100 most powerful global brands every year. Avon had been in the top 100 for a while, but it was having financial troubles at the time. The stock was down, value was down, sales were down. However, Interbrand still kept it in the top 100 because of all the philanthropic and environmental programs the company did.

Here was hard-nosed Interbrand saying Avon was valuable, despite its financial challenges, because of all its sustainable activity.

Pinabell (Starwood Hotels): We made a concerted effort to reduce energy consumption across all out hotels by 12.5% and water consumption by 17%. When we studied the costs our hotel owners would have spent had we not done so, it came to just under $200 million.

We also did a study a couple years ago where we looked at what would happen if all of our properties did foundational initiatives, low to no cost operational and capital improvements such as low-flow faucets and fixtures, high-efficiency lighting. We did financial studies of all the hotels that had done those and then projected that across the portfolio. We found that if all our hotels did those easy things we would save the portfolio about a billion dollars.

Our head of sales told me that more than 95% of all RFPs that come to Starwood require reports on our corporate responsibility and environmental programs. Corporate partners are making decisions on where they hold their meetings based on those programs. So it’s actually driving a lot of top-line growth, too.

Elder (JetBlue): This past October we launched a farm at JFK Airport where we grow blue potatoes, among other things. The reputational halo that comes from that is amazing, but it also helps educate people about urban farming. We really sought to provide an example that you can do something green and beautiful in the most urban location.

More importantly, as it turns out, urban farmers and people interested in those kinds of activities are really loyal. They get behind brands that do innovative things such as that. Our crew members at JFK stop by the farm and pick up various products we grow to take home and cook. There are businesses around JFK who use our products in theirs. And, again, that community is incredibly loyal and will fly us over other airlines. There is a bottom-line customer segmentation growth happening at JetBlue because of this activity.

Beaudoin (RF|Binder): Paul Holman at Unilever was the first business leader to really come out and say his company was going to be sustainable, along with all of its brands. The business case might not have been as strong when he first made the proclamation, but now you are starting to see that the fastest-growing brands in Unilever’s portfolio are the ones that are sustainable. This is the ultimate business case for sustainability, not to mention the success Unilever has had rallying consumers around the world to also live sustainable lives.

Beginning the journey

Fidelzeid (PRWeek):How can a company that is not far along on its sustainability journey build a foundation of a program that truly helps both society and its bottom line?

Beaudoin (RF|Binder): It has to start with the culture. If you get your entire workforce thinking sustainably then it’s not about forcing things on people. It’s about what you do every day.

Incorporating sustainability into job descriptions would also have a huge impact. Describing each employee’s role and how they can drive more sustainable business practice. Employees will truly be the ones to drive the most impact, so building a sustainable culture is the place to start.

Heaney (Rainforest Alliance): You have to measure what you accomplish, so you need a baseline of where you're starting. You can’t say you’re going up, down, or sideways unless you know where you’re starting. You also need materiality to make sure that the areas you’re focusing on make sense to your business, to your customers, to your employees.

Find ways to engage your people in sustainable activity to make them proud about what you’re doing. And it's vital to have some easy-to-achieve goals so that everyone can recognize quick successes, but also have the longer-term goals and incentivize people to help achieve those.

I agree with Scott about the importance of employees in this equation. Brands that truly shine on sustainability have entire employee bases committed to it. And that is actually another financial element to this - employee retention. People want to feel good about where they work.

Pinabell (Starwood Hotels): If you're just starting to think about this, it's important to keep it simple. Find two or three things - no more - that make sense to your business. Talking about sustainability can get challenging, complicated, and overwhelming. Drill it down to simple messages that resonate with people in your organization.

Communications is also a crucial factor here. You need that person in the company who can influence the workforce and help them understand how to incorporate sustainable activity into their job goals and priorities. Not everyone has that skill, but you need to find someone who does.

Elder (JetBlue): The head and heart have to meet. Sustainability programs have to make sense for the business, but they have to match your brand’s core beliefs.

JetBlue gets approached by a lot of entrepreneurial artisanal companies that want their products on our flights. We are very much in favor of working with these brands, but it has to make sense. So we came up with our BlueBud program, which encourages small companies to apply to spend time with us to learn what it takes to get a food or beverage product on our aircraft. For example, this local tea company, which we liked, wanted to have their teas on our flights, but the bottles were too heavy. Issues you would not automatically think about.

One company we were very impressed with was Hot Bread Kitchen in Harlem. It's social mission is inspiring and its breads are delicious. We’re in the early stages of having some of their products on our flights as a result of this program.

It's an honor, truly, to work on programs such as this that really have an impact on society, our crew members, and our business. This is the head and heart working together - and that's the place to start any sustainability program.

Providing an example

Fidelzeid (PRWeek):Discuss an initiative that highlights how organizations are bringing creativity and innovation into the CSR/sustainability arena.

Elder (JetBlue): For years JetBlue has worked on Soar with Reading. It’s gotten a lot of attention because it’s a science-based approach to address the pitfalls with how kids learn and the fact that several communities don’t have books. This year, as part of that program, we created book vending machines for in-need communities. To be able to take this first book home is a tremendous thing for kids. We work with a lot of education experts to advance the program.

The reason this program stands out for me is because Soar with Reading has always been a noble initiative that has made a difference, but the tweak of adding vending machines took its impact to another level - and that’s something you always strive for with sustainability efforts.

Pinabell (Starwood Hotels): Last year we launched Thinking Beyond Conservation during World Water Week. This was an effort meant to look at our water usage beyond the "30, 30, and 20" program. For us, it can't be solely about what's happening inside our hotels. It's about highlighting innovation around technology to reduce water consumption and the partnerships associated with that. It’s about what we’re doing for our communities.

We did a video about all of our water conservation efforts and it turned out to be the most successful corporate video we had ever done in terms of views. The video looked at water risk, our wash programs, and it basically synthesized everything into this one simple notion of Beyond Water.

Heaney (Rainforest Alliance): One interesting brand that works with the Rainforest Alliance is Martin Guitar. It has been around for 100 years and it has an entire line of Rainforest Alliance sustainably resourced wood guitars. It partners with our organization on a concert series that has been massively popular.

You might recall a few years back Gibson Guitar got caught using illegal wood. It was a very small portion of a certain kind of wood, but once you get tarred with something like that, it has a negative impact on a brand that is hard to shake off.

Martin Guitar not only has a commitment to sustainability, but they recognized a really cool opportunity to reinforce it to a broad audience. We are working with them now to grow its portfolio of sustainably sourced wood guitars.

Beaudoin (RF|Binder): Two examples stand out for me, both of which highlight the leading role Millennials are assuming on the sustainability front.

G-Star's Raw for the Oceans campaign. This brand took plastic from the ocean and turned it into fashion – a fantastic and functional idea.

In addition, what the World Bank is doing with Action for Climate is admirable. It is getting Millennials involved in filmmaking around some of the world’s greatest challenges. The bank is taking an active role on sustainability issues by empowering Millennials, who have proven to care deeply and passionately about such issues, to rise up and drive change. It's a different brand approach to making a difference, but very powerful.

Employees taking the lead

Fidelzeid (PRWeek):How do you get employees to truly buy into the company's sustainability efforts?

Heaney (Rainforest Alliance): Obviously, everyone in my organization is 100% on board, but I'm encouraged by the amount of companies that seek me out to identify employee-engagement programs.

I created a program at Avon where we challenged each of our 45,000 employees around the world to come up with ideas of how the company could do anything better from an environmental standpoint. The caveat was you had to be the person in line to implement or influence it. It wasn't just offering a suggestion for someone else to follow up on. If you suggested it, you had to be ready to lead on it.

We had about 300 ideas submitted and the two winners got to present it to the executive committee. Few ever get that kind of access to the C-suite, so it was a great enticement. And we implemented both of those ideas.

You will find pockets of enthusiasm where you least expect it and you'll come across brilliant ideas you never would have imagined. But you need to offer recognition. You need to celebrate those willing to get involved. You need to make heroes out of the people in the trenches.

Pinabell (Starwood Hotels): Our associates are very proud of their hotels. They like to show them off. Of course, global citizenship is a foundational tenet of the Starwood brand. So we brought those factors together in a Better World contest we launched a couple of years ago.

Each property would focus on some idea they had related to energy, water, or waste. We received submissions from all over the world. Associates voted on the best ideas and one hotel in each of our divisions received $5,000 to put toward a sustainability project. And, of course, these winners were highlighted in videos, which really help build buzz - in this case around sustainability.

When we gauge employee attitudes about working for Starwood, we always ask specifically about opportunities to spend time volunteering on projects they care about and how that impacts their feelings about the company. Year over year, we have seen the numbers rise to prove a clear correlation between our associates being proud of working at Starwood and their ability to commit time to causes of importance to them.

Elder (JetBlue): I'm so fortunate to work at a company with unbelievably engaged employees. We get about 80% engagement on our sustainability programs, which is the envy of anyone I speak with. And the best thing about our efforts, they are not top-down at all, but bottom-up.

A great example is One Thing That’s Green. The entire program started when a tech-ops worker was one day observing the manner in which we were using so many disposable gloves. He suggested we get a washing machine to wash them all so we can reuse them.

Our CFO’s eyes lit up because now we don’t have the glove cost. We only have to replace them every so often. Such a simple idea, rooted in sustainability, has evolved and saved the company money.

Other programs that were initiated by employees include a carbon offsetting effort that enables us to support 400,000 acres of rainforest in Brazil and our entire on-board recycling program.

Of course there are programs that come from the top that we need our workforce to get behind, but 80% of our sustainability programs are initiated by crew members. It puts me in an enviable position because I don't have to coerce involvement and buy-in. It is already there.

Beaudoin (RF|Binder): Companies need to find ways to not simply get employees to volunteer for the sake of volunteering. Rather, it's much more effective for all concerned if they can volunteer in a way where they could use their core professional competencies. Skills-based volunteering - and a great example is Pfizer.

Pfizer sends employees to different parts of the world where certain health issues are a real concern. These associates get on-the-ground training in working with NGOs and understanding how they deal with health issues we don't come across in the US. Not only are they helping society, but they bring all that knowledge back to the company. So there’s a shared value model around skills-based volunteering.

Telling the right story

Fidelzeid (PRWeek):What is the key to telling a broad consumer audience your brand’s CSR/sustainability story effectively without seeming self-righteous?

Elder (JetBlue): As a brand, we just have to keep working on the right things. We have become the preferred airline for urban farmers due to our efforts. We were the first airline to sign agreements with US Fish and Wildlife to prevent illegal animal trade and air trafficking. We were the first airline to sign the White House Climate Pledge around emissions and fuel-saving technology.

When you tell these stories, you have to focus not as much on what you've done, but on inviting your audience to join you in these efforts, to be part of your community, and to tell you what they think. We want to hear from our customers, including when it comes to our sustainability programs. We don't bang them over the head with our efforts in this arena. It's about engaging them in a way that makes sense to them and not forcing a message or an action on them.

Pinabell (Starwood Hotels): I echo Nancy's sentiments about customers. Communications starts with listening and a lot of the really compelling programming we do is based on guest feedback, whether through social channels or our guest satisfaction index. I've spoken a lot about our water-usage programs. It is no coincidence that becoming a lot smarter about how we use water is very much in line with providing our guests with the services and amenities they want.

Of course, there are more obvious guest-facing programs that the mainstream media picks up on. And, back to the water story, the press is drawn to stories such as that because of the innovation in our efforts to reduce water consumption by 17%.

Heaney (Rainforest Alliance): Don’t talk about what you did. Talk about why you did it and the impact it had. What did it ultimately drive. And by all means, do it through storytelling. It's not by chance that practically any New York Times story you read on global issues starts with Jane Doe. Bring your stories to the human level. Make people the heroes, not your company.

Another key factor is the optics. Do what you say. I have been in so many hotels where you get that card telling you to put your towels back on the rack and they won’t be replaced - and they get replaced. That infuriates me. What good is it having a terrific green initiative if your employees don’t follow it? That's a surefire way to undo a great sustainability program.

Beaudoin (RF|Binder): You have to find a way to make your sustainability campaigns relevant to people's everyday lives. Customers do care about the good brands do for the world, but it resonates more if they relate to it personally.

P&G's Always Like A Girl effort really underscores this. For years, the brand was championing for girls all over the world to be self confident - and doing so through education. But this particular campaign created a message we could all understand. They focused on words everyone has heard - "like a girl." That is something everyone can care about because the message has been made relevant to them.

Find the relevance in what you do to everyday people in a way that it becomes almost a human truth. Do that and you’ll find the power to make things travel far. And when the focus of what you’re talking about is sustainability and global citizenship, those are messages that deserve to be heard far and wide.